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Client Update: Telecommunications consumer protection report card

4 September 2013

In brief: The Australian Communications and Media Authority has reported that Australia's three largest telecommunications providers – Telstra, Optus and Vodafone – have shown 'encouraging' levels of compliance with the Telecommunications Consumer Protection Code a year after its introduction. Partner and TMT Sector Leader Niranjan Arasaratnam and Lawyer Amy Burton report on the effectiveness of the Code, the extent to which it is compelling telcos to implement initiatives that boost consumer confidence, and the flow-on impact on the regulation of internet service providers.

Background

On 1 September 2012, the Australian Communications and Media Authority (the ACMA) registered the Telecommunications Consumer Protection Code (C628:2012) (the Code) after an extensive public inquiry into the performance of telecommunications service providers. The Code imposes a number of obligations on service providers that aim to protect customers from 'bill shock' and confusing mobile plans, as well as boost consumer confidence in the industry.

Given its scope, the ACMA agreed that the Code would be progressively phased-in over a two-year period. Most of the key provisions of the Code have already been implemented, requiring service providers to:

  • immediately acknowledge consumer complaints and resolve urgent complaints within two working days and non-urgent complaints within three weeks;
  • include any important conditions and exclusions in advertising, and avoid using terms such as 'unlimited', 'no exceptions', and 'no exclusions', unless that is genuinely the case;
  • prominently display unit pricing when advertising the price of data plans in printed and online advertisements;
  • complete an assessment of financial hardship within seven days of receiving information relevant to a request for assistance; and
  • from 1 September 2013, provide notifications to customers when they have reached 50, 80 and 100 per cent of their data allowance.

One year since the release of the Code, the ACMA has just reported that Australia's three largest service providers are demonstrating high levels of compliance with the complaint handling processes set out in Chapter 8 of the Code. Despite this, it appears that the industry needs to do more than merely tighten regulation in order to strengthen customer confidence.

Are service providers complying with the Code?

The ACMA has already started to enforce the Code. To date, it has formally directed two small service providers – Touch Mobile and Jadi 1 – to comply with the product information rules set out in Clause 4.1.2 of the Code. It has also issued a formal warning to Vodafone for failing to prominently display mobile phone standard charges in accordance with clause 4.2.6.

Most recently though, the ACMA has gained media attention for its encouraging report on the efforts of Telstra, Optus and Vodafone to resolve consumer complaints within 10 working days of a resolution being reached by the service provider and the customer (under clause 8.2.1(a)(xiii) of the Code). After investigating service providers earlier this year, the ACMA has concluded, in separate reports released on 29 June 2013, that overall, the service providers have demonstrated 'high' levels of compliance with the provisions. More specifically, the ACMA reported that between April-December 2012:

  • There was only one incident where Vodafone took longer than 10 working days to resolve a complaint. However, the ACMA was satisfied that the delay was not in breach of the Code because Vodafone had been awaiting confirmation from the customer before it could action a resolution.
  • Optus took longer than 10 working days to resolve three complaints. The ACMA held that one of the complaints was in breach of the Code, even though the error – delivering the wrong replacement handset to a customer – was 'unintentional'.
  • On five occasions Telstra took longer than 10 working days to resolve a complaint. The ACMA held that only one of the five complaints was in breach of the Code. The breach involved a customer incorrectly charged after returning the product in question.

Importantly, the results of the investigation demonstrate that the ACMA is taking a measured approach towards service providers who are allegedly in breach of the Code. The report is also a useful reminder to consumers that they must accept the proposed resolutions of service providers before the resolution can be actioned.

Should service providers do more than merely comply with the Code?

Even though the ACMA appears to be satisfied with the efforts of the large service providers to comply with the Code, its report does not consider the larger challenges that are facing the industry. Currently, the biggest concern for service providers is the threat of over-the-top (OTT) providers like Skype, Facebook, Viber, WhatsApp and Foxtel Play. These providers are offering innovative products to consumers (such as free text messaging and phone calls, and low cost video streaming) 'over the top' of the traditional services offered by telecommunications and internet service providers (ISPs).

Unlike in Asia, where service providers have been quick to collaborate with OTT providers such as Viber and WhatsApp, Australian telcos continue to be slow to respond to the increasing threat of revenue loss. This should be a concern for them, given that the NBN will only make it easier for OTT applications to thrive. So far, service providers are still relying on 'traditional' initiatives to maintain their market share. For example, Vodafone has announced that it will increase its call centre staff in Tasmania and will soon introduce phone plans that limit international roaming charges to reduce 'bill shock'. Similarly, Optus currently offers customers access to Facebook and Twitter without incurring data charges, and has announced that customers who exceed their monthly data allowance will only be charged an additional $10.

While it seems unlikely that these initiatives will be enough to compete with the innovative OTT technologies, there may be some significant solutions in the pipeline. Recently, Telstra's chief technology officer Dr Hugh Bradlow suggested that service providers work with OTT providers to help them deliver their services more effectively, for example, by running customer help lines that will assist consumers to utilise OTT services. Alternatively, Anthony McLachlan of the ABC's Technology and Games has proposed that service providers charge a fee to 'ramp up' or 'ramp down' broadband speeds so that customers can enjoy faster OTT services. If Australian service providers act quickly, these proposals may help them to compete in the market.

Next steps

It's fair to say that consumer satisfaction is high on the agenda in the technology industry. In addition to the increased regulation of the telecommunications sector, the ACCC has recently announced that it proposes to monitor the broadband performance of ISPs. Assuming that this proposal is accepted, the findings of the ACCC may lead to a consumer protection code that is similar to the Code.

Alongside increased regulation, the rise in innovative technologies has forced service providers to rethink their traditional business models. It has become clear that consumers now have the upper hand. If consumers aren't satisfied with their service providers, they can almost entirely turn their backs on them in favour of OTT applications. Accordingly, it is essential that service providers act quickly and innovatively to avoid the risk of being perceived by consumers as outdated companies which simply provide mobile phones and enable network access.

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